California Voters Reject Billionaire Tax as AP Calls Proposition 40 for No

California voters have rejected Proposition 40, the ballot measure that would have charged the state's billionaires a one-time tax of 5 percent on most of their wealth, according to a race call by the Associated Press on Monday. With about 83 percent of ballots counted, the no side led 52.8 percent to 47.2 percent, a margin the AP declared irreversible nearly a week after Election Day on November 3.

What the measure would have done

Proposition 40 was proposed by the Service Employees International Union-United Healthcare Workers West, the union that represents healthcare workers in California. It would have imposed a one-time 5 percent tax on the net assets of California residents worth more than 1 billion dollars. The measure was designed by the economists Gabriel Zucman and Emmanuel Saez. The union estimated the tax would raise about 100 billion dollars, most of it to backfill federal healthcare cuts, with a share for education and food assistance. It would have been the first modern tax on wealth in the United States, where taxes are usually charged on income rather than on assets.

A fight the billionaires funded

The campaign against the tax drew large sums from the people it would have charged. Google co-founder Sergey Brin spent nearly 102 million dollars fighting the measure, and the committee working to defeat it, Building a Better California, raised more than 333 million dollars, the AP reported. CalMatters put total donations from wealthy opponents at 378.4 million dollars. The union spent more than 30 million dollars supporting the tax, the Wall Street Journal reported. Opponents also placed two more measures on the ballot, Propositions 41 and 42, designed to block the tax even if it passed. Proposition 42, which would ban new taxes on assets, led 51.6 percent to 48.4 percent on Monday evening and had not been called.

Democrats split down the middle

The measure divided California Democrats. Governor Gavin Newsom opposed it, as did Xavier Becerra, who was elected governor on November 3. The state Democratic Party backed the tax, and Representative Ro Khanna and Senator Bernie Sanders campaigned for it in California. Support ran strongest in the state's biggest coastal counties: San Francisco County voted 56.2 percent yes and Los Angeles County 55 percent yes, while Orange County voted 59.3 percent no and San Diego County 54.3 percent no. The nonpartisan Legislative Analyst's Office had warned that some wealthy residents could leave the state and that the measure could in time reduce state revenue.

What happens next

The antitax campaign called Proposition 40 a reckless experiment on the state's economy. Dave Regan, the union's president, said supporters would put a billionaire tax back before voters in 2028 if lawmakers in Sacramento do not find another way to pay for the healthcare cuts. Because California counts mail ballots postmarked by Election Day that arrive within a week, the full count will continue, but the AP call settles the outcome: the country's first modern wealth tax has been voted down in the state that proposed it.